Over the past five weeks, mortgage rates have dropped about half a percentage point, according to a survey by mortgage research firm HSH associates - this comes after a May 23 confirmation that the average rate on a 30 year fixed-rate loan was 6.02 percent, a figure that jumped to 6.55 last week, while the bearer of an average jumbo loan suffered a crushing 7.12 percent rate. The typical 5/1 adjustable rate mortgage (ARM), a mixture of conforming and jumbo loans - also happened to jump half a percentage point.

Being presented with enough facts and figures to make even the savviest financial analyst feel a bit panicky is all well and good, but what does all of this stomach-churning monetary mumbo-jumbo actually mean?

Despite the tangled web of effects, the cause is fairly simple: our fear of inflation is driving the American rate increases. While we are not technically in a recession (read: yeah, we're kind of in a recession, even though Dubya might not want to admit it) due to the shred of life to which our economy is tenuously clinging, panic is still widespread. And to make matters worse, the Federal Reserve announced it would no longer slash interest rates - in fact, it may start raising them, due to the abundant fear of inflation. Fighting inflation with the threat of inflation? With that axe swinging over our fragile heads, what options are Americans left with?

Fear not, for we have produced a handy guide for buyers, sellers, and adjustable rate mortgage holders as a sort of financial Bible to combat the evils of impending inflation.

Whether you're a first-time buyer or a seasoned flipper, putting a down payment when purchasing a property is an absolute necessity. Americans are used to flashy promises - no money down! No payments for 60 months! Zero percent APR! - But rarely do those promises deliver. Buyers must break themselves of the habit of looking for these deals - after all, if it sounds too good to be true, it is. The minimum for a Federal Housing Authority loan is, in today's market, three percent. In most marketplaces, you'll fare better with anywhere from five to 10 percent, while the more desperate housing markets will ask for 10 to 20 percent down. In this case, less is not more - more is more. The more money a buyer invests in a down payment, the lower their mortgage rate in the end.

To get the best rates in the market place, a buyer needs a credit score over 720. A lower score will get a purchaser financed, but they can expect it to be at a higher rate. According to myfico.com, buyers can expect similar rates to those below in their own housing markets. Data is based on a 30 year fixed-rate loan of $300,000.

760-850-6.179 percent-$1833
700-759-6.401 percent-$1,877
660-699-6.685 percent-$1,933
620-659-7.495 percent-$2,097

Buyers should be sure to take stock of their income and their assets. In today's world, it isn't enough to say you have money - you have to prove it. During the halcyon days when American pants were sagging under the weight of heavy wallets, lenders would allow debt to encompass up to 55 percent of a buyer's income; today, in these trying financial times, that figure is 43 percent. All buyers should be pre-approved for loans, so they know what they can actually afford.

As painstaking as research is, buyers also need to invest time in comparing rates. Mortgage lenders and bank-owned mortgage companies are the most auspicious choice for anyone who wants a standard conforming loan, but those buyers who wish to travel a less traditional path (say, one that doesn't force them to document their income) should still deal with a lender who keeps their loan in a portfolio. Credit unions, small banks, and thrifts are the best bets for a nontraditional buyer - and, as always, the nonconformist must have a back-up plan.

Anyone looking to sell a home, realistically, needs to immediately reevaluate their expectations - this is not 2005, and the housing market will not come to beat down your door. Sell one property before purchasing another, and be realistic about what your current property will sell for - financing opportunities are few and far between.

If you have an ARM and recently enjoyed watching your rate fall, do not rejoice! Be smart - refinancing is not your first or your best option, because, in the long run, a fixed-rate loan is more costly, and if your rate suddenly shoots up again (as ARM rates are prone to do), you will need to be as frugal as possible. Stash away any extra cash from this year, because hard times may be on the horizon.

If you're feeling nervous about what you have read there's no need for any of it. The Federal Reserve is the ultimate gauge and if the FED is not going to increase or decrease rates then be prepared for the long haul of possibly stable rates in interest. If you're a buyer with good credit with a ample down payment you should be in home heaven since home prices have fallen and the selection is overwhelming. Meaning on the optimistic side you'll be buying cheap and much more home than you might possible need with the time to enjoy it and wait until home prices rise again to sell. If you're the buyer with poor credit, minimal down payment and the red line of 44% income to debt try to save your money, clean up your credit and reduce your income to debt. Lock in a good location, set your sights on surveying the banks for the best rates and deals and be ready to deal. 

Finally, no matter whom you are or what your financial situation is, the best thing to remember is not to panic. Home rates rise and fall - currently, home prices are low, which offsets mortgage rate gain. With enough time, patience, and diligence, you will be able to find a proper way to manage your money and your properties until happy economic days are here again. Invest in the rainy day fund now, and it will pay off when our current business downturn inevitably fosters an upswing. Don't refinance. Don't hold multiple mortgages, if at all possible. Remember, when your Grandma taught you that patience was a virtue? She wasn't kidding. Deal with the market as it is now - good things come to those who wait.